UK economic growth slowed in Q1, further deterioration likely in Q2

The first preliminary estimate of UK's Q1 gross domestic product released by the Office for National Statistics (ONS) showed UK's Q1 GDP came at 0.4% inline with expectations and compared to 0.6% in the last quarter, while the yearly reading stood at 2.1% vs 2.0% expected and 2.1% last quarter.

Output decreased among the three main industrial groupings within the economy, with production falling by 0.4 percent, construction output by 0.9 percent and agriculture by 0.1 percent. But Britain's dominant services sector, which accounts for more than 78% of the UK economy, made strong ground, lifting 0.6% in the first quarter.

The slowdown was mainly attributed by analysts to the "increasing EU referendum risk, which is likely scaring investors and industry. A series of industry surveys covering the manufacturing, construction and services sectors had already pointed to a slowdown in GDP in the first quarter of this year.

"A slowdown to 0.2 percent or worse could be seen in the second quarter as uncertainty surrounding the EU referendum exacerbates existing pressures on the economy, such as worries about global economic growth and the impact of further deficit-fighting austerity measures," Chris Williamson, chief economist at Markit.